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Latch onto ‘back door’ moving-expense deductions

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Generally, you can deduct moving expenses only if they’re related to your job. You must meet a tough two-part test to qualify for deductions even if you’re pulling up stakes for a job switch.

Strategy: Nail down a deduction by going through the back door. Example: You can write off your moving expenses if your spouse qualifies under the tax rules (i.e., she rejoins the work force or starts a new business). It doesn’t matter whether or not the move is related to your job.

In other words, you can deduct the cost of moving the entire family if either you or your spouse qualifies for a moving expense deduction. (See box below.)

How do you qualify? You must pass these tests:

1. The time test. If you’re an employee, you must work full time for at least 39 weeks during the first 12 months after arriving in the general area of the new job. But you don’t necessarily have to work for the same employer during that time.

If you’re self-employed, you must work full time for at least 39 weeks during the first 12 months and a total of at least 78 weeks during the first 24 months after arriving in the area.

The full-time work requirement can be waived in the case of death, disability, involuntary separation from work (other than termination for willful misconduct) or transfer to another location for the employer’s benefit.

2. The distance test. Your new job location must be at least 50 miles farther from your old home than your old home was from your old job location (measuring by the most commonly traveled route).

What can you deduct? Assuming you qualify, you can write off the direct costs of moving. That includes the cost of transferring household goods and personal effects such as furniture, appliances, pots and pans.

If you travel to the new location by car, you can deduct your actual expenses— gas, oil, repairs and so on—or claim a flat rate deduction of 18 cents per mile for 2006, plus tolls and parking fees. You can also deduct the cost of lodging along the way.

But you can’t deduct any indirect moving expenses, including the cost of meals, pre-move house-hunting expenses, temporary living quarters, attorney fees and real estate commissions related to the move.

Tip: Avoid the entire tax dilemma by having the company reimburse your moving costs. That way, you have no tax worries so long as the reimbursements cover only direct expenses that would be deductible. Any extra reimbursements are taxable as compensation.

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